Peso declines on hawkish Fed
![peso-coins-currency](https://www.bworldonline.com/wp-content/uploads/2022/06/peso-coins-currency-1.jpg)
THE PESO weakened versus the greenback on Tuesday following hawkish signals from top central bankers at Jackson Hole over the weekend.
The local unit closed at P56.225 per dollar on Tuesday, down by 20.5 centavos from its P56.02 finish on Friday, Bankers Association of the Philippines data showed.
Philippine financial markets were closed on Monday for a holiday commemorating National Heroes’ Day.
The peso opened Tuesday’s session at P56.15 against the dollar. Its weakest showing was at P56.32, while its intraday best was at P56.10 versus the greenback.
Dollars exchanged rose to $1.08 billion on Tuesday from $804.5 million on Friday.
“The Philippine peso depreciated further today coming off from the hawkish statements of Fed Chair Powell last Friday. This also followed declines in Asian emerging market economies yesterday,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message on Tuesday.
“Powell’s speech prompted more market participants to price in another 75-bp (basis point) rate hike for the Fed in September, which led to dollar gains against other currencies,” Ms. Velasquez said.
US Federal Reserve Chairman Jerome H. Powell on Friday said the US may see slower economic growth and an increase in unemployment as the central bank continues to raise rates to fight rising inflation.
The Fed has raised rates by 225 bps so far since March, including back-to-back 75-bp hikes in June and July.
“Traditionally, the peso is weakest in Q3 as businesses import more for the holiday season. We expect that the recent depreciation will take a turn once remittances come in and as BSP (Bangko Sentral ng Pilipinas) continues its monetary tightening cycle,” Ms. Velazquez added.
The peso weakened following hawkish signals from the Fed and other central bankers recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The local unit also declined following petitions for another transport fare hike that could lead to higher inflation, Mr. Ricafort added.
The BSP has increased borrowing costs by 175 bps since May as it seeks to bring inflation back within target.
Headline inflation accelerated to 6.4% year on year in July, exceeding the BSP’s 2-4% target for a fourth straight month.
For Wednesday, Mr. Ricafort said the peso may move from P56.10 to P56.30 versus the dollar. — KBT